Nigerian deposit money banks (DMBs) raised N2.8 trillion from the Central Bank of Nigeria’s (CBN) standing lending facility to cover a financing deficit, according to an emailed note from an investment business.
Local lenders flocked to the CBN lending window to borrow funds to meet their daily liquidity needs despite double-digit rate pricing. The short-term cash shortfall has rendered local lenders net borrowers, but some banks with ample liquidity have also made deposits via the deposit window.
Analysts observed that financial system liquidity strengthened at the close on Friday compared to the previous week, aided by OMO maturities and FGN bond coupon inflows.
The amount in the financial system increase strongly as inflows from FGN bond coupon payments worth N402.96 billion saturated the system, said Cordros Capital Limited.
For most part of the week, liquidity was negative, with most Deposit Money Banks (DMBs) relying on CBN’s standing Lending Facility (SLF) to fund their operations, AIICO Capital Limited revealed.
Due to borrowing by the commercial banks, liquidity level in the money market inched higher by 62.4% week on week to close at N1.2 trillion, Afrinvest Limited said in a note.
Investment banking firms anticipate sufficient system liquidity in the new week due to FGN bond coupons and FAAC inflows. However, debits from NTB and FGN bond auctions may further exacerbate the liquidity situation.
The market expects to see inflows from FAAC disbursements totaling N828.08 billion and FGN bond coupon payments worth N202.45 billion in the week.
Consequently, the Open Repo Rate (OPR) and the Overnight Rate decreased by 151 basis points and 176 basis points, settling at 29.69% and 29.97%, respectively.
In a related development, cash-rich commercial lenders deposited N566 billion in the Central Bank of Nigeria’s standing deposit facility.
At the previous monetary policy committee meeting, the CBN restricted the Standing Deposit Facility (SDF) rate at 25.75% on deposits up to N3 billion, with a fixed rate of 19.0% on excess deposits, deterring banks from using this window.
The CBN eased its suspension on banks borrowing from its Standing Lending Facility (SLF). Following the decisions announced at the Bank’s 296th meeting, the top bank pegged the lending rate at 31.75 percent.
